Recent case rules in favour of agricultural property relief for elderly farmer

The recent case of Charnley and another v HMRC [2019] has seen the law firmly placed on the side of the farmer in this important appeal against HMRC. Ben Taylor, solicitor at Roythornes Solicitors, looks at why this is significant.

Grazing licences in the context of Agricultural Property Relief (APR) are a hot topic for HMRC at the moment. The case, which went to First Tier Tribunal in July this year, will be helpful to those farmers whose land is used by third parties for grazing, particularly if this route is taken as the landowner gets older.

The case in question, Charnley and another v HMRC [2019], pertains to Mr Gill who owned a farm of around 22 acres in the north of England. In the latter years of his life, he allowed other farmers to graze their livestock on much of his land under annual grazing licences.

Mr Gill died on 20 November 2013 and his estate claimed APR and Business Property Relief (BPR). HMRC issued a Notice of Determination on 1 November 2017 refusing the claim for APR over the house, brick barn and other outbuildings.

APR was allowed over the land but based on the condition of “ownership” rather than “occupation”, which importantly meant that relief was not available over the farmhouse. This is because HMRC deemed that the farmhouse and outbuildings were not “occupied for the purposes of agriculture” in the two years before Mr Gill’s death.

Mr Gill’s estate argued that separating the farm into distinct elements was the wrong approach as possession, control and occupation of the land remained with Mr Gill. He also remained responsible for attending to hedges, fences, control of weeds, topping and more, which was helpfully demonstrated by Mr Gill’s detailed records of his work on the farm - something I have recommend to clients in the past.

This was supplemented by one of the graziers describing the arrangement as Mr Gill “farming his land using my stock” and that Mr Gill was “the boots on the ground”. The evidence reported by the grazier was that the deceased was very active in terms of managing the animals, the land and in respect of the commercial agreement (fees, timings etc.)

HMRC contended that Mr Gill did not carry out agricultural activities throughout the relevant period but instead rented his agricultural land, and his actions were not enough to meet the requirements of the legislation. They also argued that his records centred on the livestock rather than the grass as a crop.

The First Tier Tribunal recognised, via the case of Atkinson, “the wide range of activities that can constitute agriculture”. It was noted that Mr Gill and his father had historically farmed the land, that Mr Gill had continued after his father’s death, and that over time Mr Gill made the land available to others.  

In coming to their decision, the Tribunal put greater weight on the evidence provided by the witnesses as to the nature of Mr Gill’s activities on the farm, records kept by Mr Gill and photos.

This led them to conclude that Mr Gill’s activities had always been and remained that of farming and that the changing nature of the business was not sufficient to alter this – “in our view, the activities carried out by Mr Gill were those of a farmer, working an active farm”. Since the deceased was considered an active farmer managing the farm from his home, it followed (the remaining conditions satisfied) that the farmhouse should qualify for relief.

Notably, limited weight was given to the receipt of Single Farm Payments and formal licences, with more emphasis put on the work factually carried out by Mr Gill.

It is clear from the judgment that evidence of the activities undertaken on the farm played a key role in making a decision, so it is important to get that part right where grazing agreements are put in place.

In recent years we have certainly seen an increase in the number of cases where grazing arrangements are being challenged. HMRC do not appear to like to the nature of grazing in the context of achieving APR on farmhouses and farm buildings. It’s therefore heartening to see that this case is a push in the right direction for the taxpayer.